Tag Archives: music business

The hype machine is all a-flutter about Turntable.fm, which isn’t totally unreasonable because it’s a great app. But there are a couple reasons to calm down.

First, it is not the creator of the idea. Turntable.fm is a clone of Listening Room. LR was too buggy to use when it was first released, and the Turntable.fm folks took their copy from zero to better-than-the-original before the original could get up to snuff. Credit is due for being a really fast follower, but let’s not forget the original.

But the big reason for tamping down the euphoria is that the economics are no different than ever. Turntable is a webcaster, paying the same royalties as Pandora and other non-interactive streamers. This is a break-even business.

Back in the day when Pandora was number #3 behind AOL and Yahoo, what got it into first place was that AOL and Yahoo both exited the radio business. Just walked out the door and didn’t come back, like holders of underwater mortgages in one of those foreclosure ghost towns. These companies had no problem finding listeners, they had a problem justifying their investment.

A break-even business has to compete for investment capital with lower risk investments like savings accounts and bigger upside investments like Groupon. It is high risk like Groupon but has growth potential like a savings account.

But Turntable.fm is in an even worse position than Pandora, in a way, because Pandora has a smaller catalog. Turntable.fm users can call for any song at any time, which means pretty much every song at one time or another. Pandora only has about 800,000 songs in its catalog. That enables it to pursue direct licensing of some tracks. Direct licensing means that Pandora cuts a deal with a label to pay less per track in exchange for playing the track more often. This is one of the very few tricks Pandora has up its sleeve, and Turntable.fm doesn’t have it.

Maybe Turntable.fm has tricks up its sleeve. It could be that something new about Turntable.fm creates a way to charge higher ad rates or pay lower royalties. Cross your fingers.